The basis of the parameters for an economy shown in Table 6.5.(All figures are in $billion. )

-Refer to Table 6.5 to answer this question.What is the value of the multiplier in this economy?
A)1.
B)1.54.
C)1.67.
D)2.
E)5.

Question

The basis of the parameters for an economy shown in Table 6.5.(All figures are in $billion. )
 
-Refer to Table 6.5 to answer this question.What is the value of the multiplier in this economy?
A)1. 
B)1.54. 
C)1.67. 
D)2. 
E)5.

Quizplus · Accepted Answer

The multiplier is calculated as 1/(1-MPC), where MPC is the marginal propensity to consume. From the table, we can find that the MPC is 0.4. Therefore, the multiplier is 1/(1-0.4) = 1.67. The best choice is C.

The Basis of the Parameters for an Economy Shown in Table